401(k) Dividends and Cost Basis

[PMurphy]

I have searched the archives and sort of gotten an answer, but still
don't think I have things sorted out correctly.

When dividendds are paid and re-invested on a mutual fund within a
401(k), I was recording them using the ReinvDiv transaction. However,
this increases my cost basis, therefore messing up my Gain/Loss percentages.

So I went back and tried the Div - Stock Dividend, but it basically
converts into a stock split. It wants the number of shares issued per
share owned, which is not intuitive and causes rounding errors since it
really wasn't a stock split.

Anyway, is there a way to record a mutual fund dividend without
affecting my cost basis?

Thanks in adavance!

 

[vcard]

ReinvDiv is the correct transaction, as it *should* affect your cost basis.
After all, the additional shares you've received cost you the value of
whatever the dividend would have been had you received it in cash. In fact,
as someone here mentioned recently regarding another investment transaction,
you really should consider this a 2-step process. (You had it right when
you specifically stated : "When dividendds [sic] are paid and re-invested".)
1. You are paid the dividend.
2. The proceeds are immediately used to aquire more shares.

Regarding the Gain/Loss Percentages - I don't use the ROR much, so will
leave that aspect for someone who knows more about it to address.

vcard

 

[PMurphy]

Thanks for the reply. You are correct that I am getting hung up on the
return aspect of this. For instance, I put in $100 throughout the year
and the shares are now worth $110. However, the fund pays out $5.00 and
re-invests the proceeds for me, my return for the year now shows 4.5%
instead of 10%.

ReinvDiv is the correct transaction, as it *should* affect your cost basis.
After all, the additional shares you've received cost you the value of
whatever the dividend would have been had you received it in cash. In fact,
as someone here mentioned recently regarding another investment transaction,
you really should consider this a 2-step process. (You had it right when
you specifically stated : "When dividendds [sic] are paid and re-invested".)
1. You are paid the dividend.
2. The proceeds are immediately used to aquire more shares.

Regarding the Gain/Loss Percentages - I don't use the ROR much, so will
leave that aspect for someone who knows more about it to address.

vcard

I have searched the archives and sort of gotten an answer, but still don't
think I have things sorted out correctly.

When dividendds are paid and re-invested on a mutual fund within a 401(k),
I was recording them using the ReinvDiv transaction. However, this
increases my cost basis, therefore messing up my Gain/Loss percentages.

So I went back and tried the Div - Stock Dividend, but it basically
converts into a stock split. It wants the number of shares issued per
share owned, which is not intuitive and causes rounding errors since it
really wasn't a stock split.

Anyway, is there a way to record a mutual fund dividend without affecting
my cost basis?

Thanks in adavance!

 

[John Pollard]

Thanks for the reply. You are correct that I am getting hung
up on
the return aspect of this. For instance, I put in $100
throughout
the year and the shares are now worth $110. However, the fund
pays out $5.00
and re-invests the proceeds for me, my return for the year now
shows
4.5% instead of 10%.

You "put in" $105, not $100. You could have had them send you a
check for the $5, instead you chose to buy more shares with it.
That's no different than if the fund paid no dividend at all,
but you sent them a $5 check to buy shares.

 

[PMurphy]

True, except in a 401(k) you don't have the choice of getting that $5
check, it is automatically deducted.

I guess what I am looking for is a way to see how much I have actually
put in vs. what the account is worth today.

I understand the reason a dividend and re-invest increases the
cost-basis, I am just not getting the data I need. At the end of a
year, I have put in a certain amount regardless of dividends paid and
re-invested.

Maybe there is a report I could run to get the information I need.

Thanks.

 

[John Pollard]

True, except in a 401(k) you don't have the choice of getting
that $5
check, it is automatically deducted.

I guess what I am looking for is a way to see how much I have
actually
put in vs. what the account is worth today.

I understand the reason a dividend and re-invest increases the
cost-basis, I am just not getting the data I need. At the end
of a
year, I have put in a certain amount regardless of dividends
paid and
re-invested.

Maybe there is a report I could run to get the information I
need.

I don't recall you mentioning what version of Quicken you are
using. In Q2005 and Q2006, on the Portfolio tab of the
Investing Center there is a menu option "Glossary". I suggest
you look in the Glossary (or your version's equivalent) for the
Quicken definition of the various terms involving "returns",
"gain/loss", etc.: there are quite a few. (And I believe some
include a distinction for amount "invested").

I believe there is a great deal of misunderstanding about what
the terms mean and how their values should be interpreted.

 

[Charlie K]

"Maybe there is a report I could run to get the information I need"

In Quicken 2005 Deluxe you can run an "Investment Performance" report
which will show only the cash contibutions and not the reinvested
dividends in your account. It also figures the average annual return
for you.

 

[PMurphy]

I don't recall you mentioning what version of Quicken you are
using. In Q2005 and Q2006, on the Portfolio tab of the
Investing Center there is a menu option "Glossary". I suggest
you look in the Glossary (or your version's equivalent) for the
Quicken definition of the various terms involving "returns",
"gain/loss", etc.: there are quite a few. (And I believe some
include a distinction for amount "invested").

I believe there is a great deal of misunderstanding about what
the terms mean and how their values should be interpreted.

Thank you very much. It was a definition problem. The columns I needed
to add were "Amount Invested" (which I did not even know existed) and
"ROI %).

These numbers give me exactly what I am looking for.

Thanks again!

 

[Bill Overman]

It sounds like you are looking for return on investment (ROI) instead of
gain/loss. ROI should be available columns if you customize the portfolio
view. That's from Q2005 deluxe, at least -- not sure about other versions.

 

[PMurphy]

It sounds like you are looking for return on investment (ROI) instead of
gain/loss. ROI should be available columns if you customize the portfolio
view. That's from Q2005 deluxe, at least -- not sure about other versions.

You are correct. I went out to the Portfolio view and added "Amount
Invested" and "ROI%" and those are the exact numbers I was looking for.

Thanks.